As a conclusion of the mission of the International Monetary Fund (IMF) Rising inflation and continued foreign currency shortages in Nigeria have fueled speculation of a Naira devaluation. To achieve a unified naira exchange rate, Nigeria will need to dismantle “various exchange rate windows of the CBN [Central Bank of Nigeria],” says this global lender
Widening exchange rate gap between official and parallel markets
The International Monetary Fund (IMF) has warned that Nigeria’s foreign exchange shortage, rising inflation, and the country’s limited ability to service its debt said it fueled speculation of the devaluation of This would “hinder the inflow of much-needed capital, encourage outflows, and discourage private sector investment.”
In the final statement of the staff of the Global Lenders of the 2022 Article IV mission, the IMF called on the Nigerian monetary authority to create a “unified, market-clearing exchange rate.” I have repeatedly called to consider moving towards the rate. To achieve this, the IMF said in his November 18 statement that the Central Bank of Nigeria (CBN) should abandon the multiple exchange rate regime.
As reported by Bitcoin.com News, Nigeria has officially pegged its currency at just under 450 Naira per dollar. In practice, however, many Nigerian businesses and individuals can only raise greenbacks and other global currencies on the parallel market, where rates have recently hit an all-time low of N900:$1.
Furthermore, the IMF’s final statement suggests that the CBN’s influence or control over the foreign exchange market should be reduced.
“In the medium term, CBN will step back from its role as a major FX intermediary, limit its interventions to smooth market volatility, and allow banks to freely determine FX buy and sell rates. should be done,” the IMF statement said.
Nigeria has not achieved its financial inclusion goals
Despite expressing concerns about Nigeria’s exchange rate policy However, the final statement from global lenders is still the CBN to tighten liquidity and curb “inflationary pressures by raising the monetary policy rate (MPR) by a cumulative 400 basis points.” Tighter monetary policy is often adopted by central banks when prices are rising too quickly or when the economy is growing rapidly.
However, in a statement, the IMF mission argued that the overall situation remained accommodative. Nigeria’s 15.5% monetary policy rate (MPR) is below inflation, which peaked at 21.1% in October. The global lender’s mission also said funding of national budgets and central banks’ “directed lending schemes continue to drive strong financial expansion.”
On financial inclusion, the IMF mission said Nigeria “has fallen short of its inclusion goals, particularly in terms of access to financial instruments.” However, the mission praised CBN’s plans to launch a regulatory sandbox for fintech. It also urged authorities to “provide more targeted training in using financial products and further expand e-Naira to the unbanked.”
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